Validity Of Lower Withholding Tax Orders Extended By 3 Months

On Tuesday, the Finance Ministry extended the validity of all lower withholding tax orders by three months to 30 June in view of hardships caused due to COVID-19 pandemic.

The Central Board of Direct Taxes (CBDT) in its order gave a major relief to taxpayers whose application for lower or nil deduction of TDS/TCS is pending for disposal saying that cases where the application is pending and where such certificates were issued for fiscal 2019-20, the validity of the certificates would get extended to 30 June 2020.

The extended deadline also applies to certificates of 2019-20 that were issued to assessees who have not been able to apply for such lower/nil deduction certificate for fiscal 2020-21.

In cases where the assessee has not applied for the issuer of lower or nil deduction of TDS/TCS and does not have any certificate for 2019-20, the CBDT has prescribed a modified procedure for application and consequent handling by the assessing officer.

The order also prescribes a 10 percent withholding tax rate on payments to Non-Residents (including foreign companies) having Permanent Establishment in India and not covered by the above scenarios) till June 30 or disposal of application, whichever is earlier.

The CBDT said due to the outbreak of COVID-19 there is severe disruption in the normal working of almost all sectors, including functioning of the Income Tax Department.

"In such a scenario, the application fuled by the payees u/s 195 and 197 of the Act for lower or nil rate of deduction of TDS and applications by buyers/licensees/lessees u/s 206C(9) of the Act for lower or nil rate of collection of TCSNSE 2.68 % for fiscal 2020-21, have not been attended in a timely manner by the TDS/TCS-assessing officers, causing hardship to taxpayers," it said.

The CBDT further said that considering the constraints of the field officers in disposing of the applications and to mitigate hardships of payees and buyers, the I-T department has extended the validity of lower withholding orders till 30 June 2020 from 31 March 2020.

Nangia Andersen Consulting Chairman Rakesh Nangia said this will ensure continuity of payments to contractors/ service providers, both resident as well as non-resident, where for specific reasons such as the character of income, tax treaty benefits, estimated losses, etc, respective taxpayers were authorised to receive payments, either without deduction of taxes or deduction at lower rates.

"Such orders are very important for cash flow management of both resident as well as non-resident taxpayers, and in present circumstances, where taxpayers and businesses are already facing severe liquidity and cash flow issues, such extension is a much welcome step by Government," Nangia added.

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